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The steady stream of headlines about data breaches has the business
community and regulators on high alert with regard to cybersecurity.

A PwC online survey of global executives and IT directors conducted
early in 2013 found that detected cybersecurity incidents rose 25%
over the previous year. And 31% of executives responding to EY’s
Global Information Security Survey for 2013 said the number of
cybersecurity incidents at their organization grew at least 5% over
the previous year.

In recognition of these trends, the Center for Audit Quality (CAQ)
released an alert to its nearly 600 public company audit firm members
that summarizes external auditors’ duties with respect to
cybersecurity. The alert is available at tinyurl.com/l297bkm. The CAQ is
affiliated with the AICPA.

“Cybersecurity is one of the most complex and evolving issues facing
public companies,” CAQ Executive Director Cindy Fornelli said in a
news release. “All players in the financial reporting supply chain,
including of course independent auditors, have an important role to
play.”

External auditors’ duties, according to the alert, include:

Understanding how the company uses IT and its impact on the
financial statements.

Understanding the extent of the company’s automated controls as
they relate to financial reporting. This should include an
understanding of IT general controls that affect the automated
controls, and the reliability of data and reports used in the audit
that were produced by the company.

Taking into account the understanding of IT systems and controls
in assessing the risks of material misstatement to the financial
statements, including IT risks resulting from unauthorized access.

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